In a strategic move to quell rising concerns about the potential cultural and economic upheaval posed by the pending merger between Paramount Global and Warner Bros. Discovery, David Ellison, CEO of Paramount Studios and co-founder of Skydance Media, has penned a detailed letter to two key California lawmakers. The correspondence, obtained exclusively by The Hollywood Reporter on Thursday, lays out a comprehensive plan to safeguard Hollywood’s creative workforce and production infrastructure in Los Angeles—and beyond—while positioning the newly formed entity as a global entertainment powerhouse. Ellison’s proactive outreach to Sen. Adam Schiff (D-CA) and Rep. Laura Friedman (D-CA-28) comes amid a wave of anxiety among industry professionals, who fear that corporate consolidation could lead to job losses, reduced content output, or even the shuttering of historic studio lots. By emphasizing a commitment to maintain Paramount and Warner Bros. as separate operating entities, Ellison is attempting to reassure both policymakers and the creative community that the merger is not a zero-sum game, but rather an investment in the future of American filmmaking.
Why the Paramount-Warner Bros. Merger Matters to California’s Entertainment Economy
California’s entertainment industry is the lifeblood of the state’s economy, contributing over $71 billion annually and supporting more than 360,000 jobs, according to the Motion Picture Association. Los Angeles County alone is home to 95% of the nation’s film and television production activity. The proposed merger between Paramount Global and Warner Bros. Discovery—two of Hollywood’s last five historic studios—has sent shockwaves through the industry, raising questions about job security, content diversity, and the long-term viability of independent filmmaking. Ellison, whose Skydance Media is set to complete its acquisition of Paramount Global in the coming months, is acutely aware of the stakes. His letter to Schiff and Friedman is not merely a corporate response; it is a policy document aimed at shaping the narrative around the merger’s benefits, particularly for California’s workforce.
The Role of the Studios in California’s Creative Ecosystem
Paramount Studios, founded in 1912, and Warner Bros., established in 1923, are among the most storied names in Hollywood. Both studios have long been anchors of Los Angeles’ entertainment infrastructure, operating vast soundstages, post-production facilities, and talent development programs. The prospect of their merger—under the banner of a new independent media giant—has sparked debate about whether consolidation will lead to layoffs, studio closures, or a diminished commitment to local production. Ellison’s letter directly addresses these concerns, framing the merger as an opportunity to "build a true champion for the creative community" rather than a threat to it.
“I firmly believe that uniting Paramount and Warner Bros. Discovery presents a unique opportunity to build a true champion for the creative community, one that can and will bring more stories to life, support filmmakers and talent with real scale, and compete effectively on the global stage as an independent media leader. That is the true legacy of Hollywood, and my promise to you is to build a stronger Hollywood, by keeping both of these legacy studios operating separately, thereby preserving and potentially increasing jobs.”
Ellison’s Commitments: A Blueprint for Job Preservation and Growth
At the heart of Ellison’s letter are a series of concrete commitments designed to demonstrate that the merger will not result in a net loss of jobs or creative output. Paramount and Warner Bros. will each maintain a 15-film annual slate, meaning the combined entity will produce 30 films per year—a significant increase from Paramount’s current output of eight films. Ellison also pledged to license content to third parties and pick up projects from external producers, creating additional opportunities for independent filmmakers and production companies. Perhaps most critically, he committed to preserving a theatrical window of at least 45 days for films, a move aimed at protecting the traditional exhibition model and supporting local cinema workers.
Theatrical Windows and the Future of Film Distribution
The 45-day theatrical window is a particularly contentious issue in Hollywood, with streaming services pushing for shorter windows to accelerate their release schedules. Ellison’s commitment to a 45-day window is a direct response to lawmakers’ concerns about the erosion of theatrical exhibition—a cornerstone of the film industry’s business model. He also expressed the "intention" to establish 60- to 90-day video-on-demand (VOD) windows for successful films after their theatrical runs, further incentivizing audiences to support the big screen. This stance aligns with recent trends, as major studios like Universal and Warner Bros. have experimented with shorter windows in response to the rise of streaming. However, Ellison’s letter signals a willingness to prioritize theatrical releases, at least for now.
Licensing and Third-Party Production: Expanding Opportunities for Local Talent
Ellison’s plan to license content to third parties and produce external projects is a strategic move to diversify the studio’s pipeline and create jobs for Los Angeles-based creators. By committing to license its work and pick up outside projects, the new entity will not only generate revenue but also foster a more collaborative ecosystem. This approach mirrors the strategies of other major studios, such as Disney and Sony, which have increasingly relied on partnerships with independent producers to supplement their in-house content. For Los Angeles, this could mean a boost in demand for local writers, directors, cinematographers, and post-production professionals.
The Role of Federal and State Tax Incentives in Keeping Production Local
One of the most pressing issues facing Hollywood is the offshoring of production to countries with more generous tax incentives, such as Canada, the United Kingdom, and Australia. To combat this trend, Ellison is advocating for two key policy changes: the restoration of Section 181 of the U.S. tax code and the establishment of a federal film tax incentive. Section 181, which expired in 2023, allowed productions filming in the U.S. to deduct production costs in the same year, making American shoots more financially viable. Ellison argues that without these incentives, the industry risks losing major projects to international competitors.
Section 181 and the Fight Against Offshoring
Section 181 was first introduced in 2004 as part of a broader effort to encourage domestic film production. Over the years, it has been credited with bringing billions of dollars in production spending back to the U.S. and supporting hundreds of thousands of jobs. Its expiration in 2023 was a blow to the industry, particularly in states like California and New York, where production costs are high. Ellison’s support for its restoration is a clear signal that the new Paramount-Warner Bros. entity will prioritize American production—but only if the financial incentives are in place to make it feasible. In his letter, he emphasized that "America already has the world’s leading entertainment workforce and world-class production facilities. It now just needs a federal film tax incentive to close the competitive gap with the rest of the world."
The Push for a Federal Film Tax Incentive
California has long led the nation in film tax incentives, offering up to 25% back in credits for productions filmed within the state. However, other states and countries have since matched or exceeded these incentives, creating a patchwork of opportunities that can pull productions away from Los Angeles. Ellison’s call for a federal incentive is part of a broader effort to level the playing field. Schiff and Friedman have been at the forefront of this push, introducing legislation to create a 30% federal tax credit for qualified film and television productions. While the bill faces political hurdles, Ellison’s endorsement adds significant weight to the argument that federal intervention is necessary to keep Hollywood—and its jobs—competitive.
Lawmakers Respond: Concrete Commitments and Accountability
Rep. Laura Friedman, whose district includes Burbank—home to Warner Bros.—has been a vocal advocate for protecting the creative workforce. In a statement to The Hollywood Reporter, she acknowledged Ellison’s commitments but emphasized the need for measurable outcomes. “I asked for concrete commitments, and some were offered, like the promise to release 30 films a year, the 45-day theatrical window, and support for the incentive,” Friedman said. “Those are measurable, and I intend to measure them. The thousands of workers on our soundstages and backlots need to see these promises show up in our lives, not just in a letter.” Her response underscores a critical reality: while Ellison’s letter is a step in the right direction, the true test will be whether the commitments translate into tangible benefits for California’s workforce.
Key Takeaways: What the Paramount-Warner Bros. Merger Means for Hollywood
- David Ellison’s letter to Sen. Adam Schiff and Rep. Laura Friedman outlines a plan to preserve and expand Hollywood jobs by keeping Paramount and Warner Bros. as separate operating entities.
- The merger commits to producing 30 films annually, maintaining a 45-day theatrical window, and licensing content to third parties to support local talent.
- Ellison is advocating for the restoration of Section 181 and a federal film tax incentive to prevent offshoring of productions and protect American jobs.
- Lawmakers have welcomed the commitments but will measure their implementation closely, emphasizing the need for measurable outcomes.
- The merger represents a high-stakes gamble for California’s entertainment economy, with the potential to either bolster or diminish the state’s dominance in film and television production.
The Broader Implications for Hollywood’s Future
The Paramount-Warner Bros. merger is more than a corporate transaction; it is a bellwether for the future of Hollywood. In an era of rapid consolidation—marked by Disney’s acquisition of 20th Century Fox and Amazon’s purchase of MGM—the industry is grappling with the consequences of fewer, larger players controlling the creative pipeline. Ellison’s letter is an attempt to reframe the merger not as a threat to jobs but as an opportunity to strengthen Hollywood’s global competitiveness. However, the success of this vision hinges on several factors: the ability of the new entity to deliver on its promises, the willingness of lawmakers to enact supportive policies, and the broader economic environment, which includes rising production costs and the ongoing shift toward streaming.
The Role of Streaming and the Changing Face of Hollywood
The rise of streaming platforms has disrupted traditional Hollywood business models, forcing studios to balance theatrical releases with direct-to-consumer content. While Ellison’s commitments prioritize theatrical exhibition, the new entity will likely continue to invest heavily in streaming, given the dominance of platforms like Netflix, Disney+, and Max. This dual focus could create a more dynamic—and potentially more volatile—landscape for filmmakers and crew members. For Los Angeles, the key will be ensuring that the growth of streaming does not come at the expense of theatrical infrastructure or local jobs.
What’s Next for the Paramount-Warner Bros. Merger?
The merger is expected to close in mid-2024, pending regulatory approval and shareholder votes. Once finalized, the new entity will face immediate challenges: integrating two massive studios, navigating the competitive streaming landscape, and delivering on Ellison’s promises to lawmakers and the creative community. For California, the stakes are particularly high. The state’s entertainment industry is a cornerstone of its economy, and the loss of even a fraction of the workforce could have cascading effects. Ellison’s letter is a promising start, but the real work lies ahead.
Frequently Asked Questions
Frequently Asked Questions
- What is the Paramount-Warner Bros. merger and why is it controversial?
- The proposed merger between Paramount Global and Warner Bros. Discovery would create one of the largest media entities in Hollywood, combining two historic studios with vast libraries of film and television content. Critics worry it could lead to job losses, reduced content diversity, or the closure of studio lots, while supporters argue it will create a stronger global competitor.
- How will the merger affect jobs in Los Angeles?
- David Ellison has committed to keeping Paramount and Warner Bros. as separate operating entities, producing 30 films annually, and licensing content to third parties. He also pledged to maintain a 45-day theatrical window, which could support local cinema workers and soundstage crews.
- What are Section 181 and the federal film tax incentive, and why do they matter?
- Section 181 was a U.S. tax code provision that allowed productions filming in the U.S. to deduct costs in the same year, encouraging domestic shoots. Ellison is advocating for its restoration and a new federal tax incentive to prevent Hollywood from offshoring productions to countries with more generous incentives.
